Stock Shastra

We said in Stock Shastra #1 that Investing in stocks is not rocket science, not as difficult as it has been made out to be. You don’t need to be an expert to do it. You just need to buy a great business with the mindset of an owner. Let’s see why this is important and how you can find this kind of business.
Why do you need to buy a great business?
If you are currently investing in stocks, what is the method you use to select stocks? Is it low P/E, low Price/Book Value, High Dividend yield? Or is it based on charts showing peculiar patterns? These methods are completely inadequate because they over-simplify your investing method. They don’t tell you about the earning capacity of a company – the key driver of its stock price in the long term. They may lead you to take a wrong decision. It’s [...]

Just after completing my Masters in Economics in 2006 from Gokhale Institute of Politics and Economics, Pune, I joined a firm which was in equity research. My work profile was to evaluate companies on the basis of certain criteria and valuation methods. After evaluating companies we were supposed to prepare reports and give recommendations. I still remember the last statement of our reports: “Currently, Company X is trading at price P. At this price we recommend it as a Strong Buy/ Buy at x% of margin of safety.” We gave similar recommendations for ‘sell’ and ‘hold’ also.
When I joined the Company, I lacked enough knowledge on financial statements and basic terminologies. I didn’t know how the stock price behaves on different corporate announcements like bonus issue, public issue, preferential issue, ……, split, buy back, ……, merger, demerger, amalgamation, acquisition, ….., restructuring, change in accounting policy, …… and government policies. There [...]

Imagine: You are on a Safari trip to Jim Corbett, high on spirits you get down to cherish the serene environment and you see a bear approaching what do you do? Tuck in your arms and play dead. Fighting back can be extremely dangerous. Similarly in a bear market it can be awfully risky because it is quite difficult for an investor to make stellar gains, Right isn’t it? Wait for a moment, this is not really the truth! This is the most common myth you’ll find all around you! Sounds strange and contrary to the common belief? Yes it does because this is how most of us feel during bearish times.
But what is a bear phase? Isn’t it just a downturn in the market or is it something else? Let me help you know it better. Think about this: you have been dreaming about that designer pair of jeans [...]